Understanding Concentrated Equity Positions

Investors often find themselves in a situation where they hold concentrated equity positions, primarily due to significant gains from employee stock options, IPOs, or founder stock. When a single investment becomes a large portion of a portfolio, it can undermine diversification. The fear of incurring substantial capital gains taxes may discourage investors from selling these appreciated shares, leaving them feeling trapped. This scenario creates a pressing need for strategies that allow for diversification without triggering massive tax liabilities.